Sur­vey shows oil, gas ac­tiv­ity ac­cel­er­at­ing along with price

The Oklahoman - - BUSINESS - Busi­ness Writer jmoney@ok­la­homan BY JACK MONEY

The most re­cent sur­vey con­ducted with oil and nat­u­ral gas en­ergy firms by the Fed­eral Re­serve Bank of Kansas City showed ac­tiv­i­ties within the in­dus­try climbed along with the price of oil dur­ing the third quar­ter.

Re­sults of the sur­vey

re­leased Fri­day also showed ex­ec­u­tives who par­tic­i­pated are pos­i­tive the busi­ness will con­tinue to be prof­itable go­ing for­ward.

Other data from the sur­vey

showed com­pa­nies con­tinue to closely con­trol their costs while us­ing ex­cess cash to grow op­er­a­tions, re­duce debt or to pay div­i­dends to stock hold­ers.

Some re­ported they re­mem­ber the most re­cent down­turn and re­main ac­cord­ingly cau­tious.

“We want to make cap­i­tal im­prove­ments to up­grade our rigs; how­ever, the 2015 down­turn is al­ways in the back of mind,” stated one ex­ec­u­tive who par­tic­i­pated in the sur­vey.

“Hoard­ing work­ing cap­i­tal rather than ma­jor ex­pen­di­tures is the fo­cus over the next six months,” the ex­ec­u­tive said.

Still, for now, the busi­ness is tak­ing ad­van­tage of good prices, es­pe­cially for oil, bank of­fi­cials said.

“Re­gional en­ergy ac­tiv­ity grew faster in the third quar­ter as prices pushed higher,” said Chad Wilk­er­son, the

Ok­la­homa City Branch ex­ec­u­tive and econ­o­mist at the Fed­eral Re­serve Bank of Kansas City.

“The prof­itable price for oil drilling was up slightly from the past few years, but still well be­low cur­rent and ex­pected prices. Over­all, the re­sults seemed pretty solid to me.”

The sur­vey mon­i­tors oil and gas-re­lated firms lo­cated or based in the Tenth Dis­trict of the Fed­eral Re­serve Bank, which in­cludes Ok­la­homa, Kansas, Colorado, Ne­braska, Wy­oming and parts of Mis­souri and New Mex­ico.

The Fed­eral Re­serve Bank of Kansas City uses the sur­vey re­sults to cre­ate in­dexes that mea­sure en­ergy in­dus­try ac­tiv­i­ties, in­clud­ing drilling, cap­i­tal spend­ing and em­ploy­ment lev­els and costs. It showed:

• The drilling and busi­ness ac­tiv­ity in­dex jumped to its high­est level since early 2017.

• To­tal rev­enues and em­ployee hours in­dexes edged lower, as did in­dexes track­ing em­ploy­ment num­bers, wages and ben­e­fits and ac­cess to credit.

• In­dexes track­ing sup­plier de­liv­ery times and to­tal prof­its also de­clined.

Wilk­er­son said the data showed most in­dexes were higher, year-over-year, and that those that were not still were at high lev­els.

As for the fu­ture, of­fi­cials said sur­vey data showed ex­ec­u­tives re­main pos­i­tive about prof­its, rev­enues and es­pe­cially po­ten­tial credit ac­cess.

More than 50 per­cent of re­spon­dents re­ported ex­cess fi­nan­cial cap­i­tal would be used to ex­pand busi­ness through cap­i­tal ex­pen­di­tures, while nearly 40 per­cent stated they would use it to re­duce debt.

A quar­ter of re­spon­dents said they would put the cash to­ward boost­ing div­i­dends, while 21 per­cent stated they would put ex­cess cash to­ward wages and ben­e­fits for em­ploy­ees. The sur­vey also quizzed ex­ec­u­tives on where they felt oil and nat­u­ral gas prices needed to be for them to con­tinue to turn a profit, and about what they ex­pected prices for oil and nat­u­ral gas to be­six months from now and five years from now.

Par­tic­i­pants re­ported the av­er­age oil price needed to be prof­itable was $55 a bar­rel, while the av­er­age nat­u­ral gas price needed to be prof­itable was $3.23 per thou­sand cu­bic feet.

Short and long ex­pec­ta­tions among ex­ec­u­tives who par­tic­i­pated in the sur­vey for oil pric­ing were $71 and $79 a bar­rel, while short and long ex­pec­ta­tions for nat­u­ral gas were $2.89 and $3.42 per thou­sand cu­bic feet.

[PHOTO BY CHRIS LANDS­BERGER, THE OK­LA­HOMAN AR­CHIVES]

A rig drills a well near Chickasha in Au­gust. The lat­est sur­vey con­ducted by the Fed­eral Re­serve Bank of Kansas City shows the oil and gas in­dus­try ac­tiv­i­ties ac­cel­er­ated dur­ing the third quar­ter of this year.

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